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The market regulator has recognized equity ETFs as an eligible security for Margin Trading Facility (MTF).
This will enable equity ETFs to be bought through leveraged money just like futures and options.
The circular read, “Based on the feedback received from market participants, recommendation of Secondary Market Advisory Committee (SMAC) of SEBI and taking into account the emergence of Exchange Traded Funds (ETFs) as an investment product with various advantages such as transparency, diversification, lower cost, etc., it has been decided to allow units of Equity Exchange Traded Funds (Equity ETFs) categorized as Group-I security as per provisions of SEBI Circular No. MRD/DoP/SE/Cir-07/2005 dated February 23, 2005 as an eligible security for MTF as well as an eligible collateral under MTF”
SEBI also directed stock brokers to separately identify collaterals (units deposited for availing MTF) and funded stocks (units purchased under MTF) and not to co-mingle for computing funding amount.
The said provisions will be applicable from December 30, 2022.
